When Walmart last week introduced Walmart Pay, it was shown to be a simple app that would accept “any major payment type” but it would only work at Walmart. In short, it was the last thing that interchange-fee-hating Walmart wanted to do, especially in the mobile world. MCX’s original vision, a merchant utopia where transactions were done in the non-interchange grab-the-money-directly-from-the-shopper’s-bank-account universe and one app was used at thousands of different merchant stores, was Walmart’s dream.
Mike Cook is the Walmart Senior VP/Assistant Treasurer who initiated the idea of MCX and pushed it so aggressively that many involved—and especially those who chose to not be involved—said the name virtually stood for Mike Cook Exchange. When Walmart Pay was announced, it was Cook whose name was on a statement issued to the media. Said Cook: “We remain committed to MCX, and recently launched acceptance of CurrentC in all of our locations in the Columbus market. We view Walmart Pay and CurrentC as complementary mobile payments solutions, and expect the two to build off each other’s success.”
Walmart expects “the two to build off each other’s success”? If Walmart had even the slightest confidence that MCX and CurrentC were going to enjoy even a modicum of success, Walmart Pay wouldn’t have been rolled out. It’s true they will support both—there’s not a lot of reason to not do so—but Walmart Pay is everything Walmart didn’t want to do.
This was about getting out from under the financial pain of Visa and MasterCard. With Walmart Pay—just like Apple’s deal with Apple Pay—they are right back under those painful thumbs. (Walmart’s massive volume means that it is paying among the lowest—if not the lowest—interchange rates anywhere today. But with its ultra-thin margin, every dollar counts.)
Walmart’s plan was to combine forces with Target and dozens of other big brands and to offer one payment mechanism for all stores, with just a little branding differentiation. This is not dissimilar to the mild differentiation that issuers make to their Visas. That was Bentonville’s vision.
Walmart Pay is limited to Walmart stores and is pushing all payments through one of the existing payments brands. So much for the dream.
But if you ignore what Walmart wanted and look at what Walmart got, it’s not half-bad. Unlike Apple Pay and Android Pay, it will work on almost all IOS and Android mobile phones—as long as they have a camera good enough to scan QR codes and can download the Walmart app. Instead of fumbling with a finicky NFC connection, shoppers can fumble with a just-as-finicky QR code.
The difference: NFC isn’t fussy about positioning, but it does freak out if the distance is not perfect and maintained. QR codes need a good aim from the phone and a minimum of shaking. In short, you don’t want to try scanning a QR code while holding a squirming toddler.
Let’s plunge into the payments specs. Tom Noyes, a former Citibank and Wachovia executive who today blogs on a wide range of payments topics (and is the CEO of Commerce Signal, a data collaboration startup), has posted some interesting particulars. For example, Walmart Pay is not using Paydiant, is not using any tokenization, it’s e-commerce operation has more 30 million cards on file and it’s QR approach in-store is getting charged the higher CNP rates.
Noyes sees MCX surviving but delegated to back-office operations such as fraud risk, routing, clearance and rules. The front-end of coupons and other customer engagement? “That will be a little more challenged,” he said.
But Noyes argues—convincingly—that given all of its limitations, Walmart Pay could easily work quite well limited to Walmart shoppers. “WalmartPay will work for Walmart. They are very good at creating great consumer experiences where their brand is central,” he said. “That same strategy is not going to work for every retailer.”
One big reason this could work well for Walmart is frequency. Frequency—and the behavioral reinforcements inherent in that frequency—is a huge Walmart strength, compared with other retailers. “You go to your apparel store maybe six times a year,” he said.
Walmart is akin to a holiday gift that is way shy of the recipient’s expectations. It’s initially disappointing, until the recipient realizes that it’s still a nice gift. It’s simply not a great one. Happy holidays, Walmart!